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CRC Energy Efficiency Scheme: how it works and advice on managing the CRC as a business opportunity.

The CRC Energy Efficiency Scheme (formerly known as the Carbon Reduction Commitment) is a mandatory carbon emissions reporting and pricing scheme to cover all organisations in the UK (excluding state funded schools in England from April 2013), using more than 6,000MWh per year of electricity.

The scheme is managed, on behalf of the UK Government's Department of Energy & Climate Change (DECC), by the Environment Agency (in England and Wales), by the Scottish Environment Protection Agency (in Scotland), and by the Department of the Environment Northern Ireland (in Northern Ireland).  

Simplification of the CRC Energy Efficiency Scheme - On 10 December 2012 the UK Government published its consultation response on simplification of the CRC Energy Efficiency Scheme (CRC). Details of this consultation and subsequent changes can be found on the UK Government's website. The information on this page reflects our understanding of the scheme as it now stands, including the changes.

How it works

The CRC comprises three primary elements:

1. Emissions reporting requirement

Participants in the CRC need to measure and report their electricity and gas related carbon emissions annually (further sources of emissions were included in the earlier years of the scheme), following a specific set of measurement rules. 

The CRC scheme applies to emissions not already covered by Climate Change Agreements (CCAs) and the EU Emissions Trading System (EU ETS).

2. A carbon price

The scheme requires participants to buy allowances for every tonne of carbon they emit (relating to electricity and gas), as reported under the scheme.

Participants are required to buy allowances from Government each year to cover their reported emissions. This means that organisations that decrease their emissions can lower their costs under the CRC.

During Phase 1 of the scheme, only one sale of allowances took place at the beginning of each year, to cover emissions in the previous year. The price of the allowances is currently set at £12 per tonne of CO2 for 2011/12 reporting year.

From Phase 2 (which started in April 2013), there will be two sales of allowances for each compliance year. The first sale at the start of a compliance year will be based on predicted emissions at a lower price. The second will be a "buy to comply" sale after the end of the compliance year at an expected higher price.

3. Publishing of information on participants' energy use and emissions

In the first years of the scheme, a CRC performance league table was published showing how each participant was performing compared to others in the scheme, based on a number of metrics including absolute and growth-adjusted reduction of emissions. The 2011/2012 CRC performance league table can be seen on the Environment Agency website.

After July 2013, these league and performance tables will no longer be published, and will instead be replaced by a publication of participants' energy use and emissions. 

Background

The sectors targeted by the Carbon Reduction Commitment scheme generate over 10% of UK Carbon Dioxide (CO2) emissions, around 55 MtCO2. The Carbon Reduction Commitment scheme aims to reduce non-traded carbon emissions by 17 million tonnes by 2027. It supports the UK Government's objective to achieve an 80% reduction in UK carbon emissions by 2050.

The Carbon Reduction Commitment scheme was announced by the UK Government in the Energy White Paper (May 2007). The need for an incentive in this sector was originally highlighted by the Carbon Trust, in our report The UK Climate Change Programme: Potential evolution for business and the public sector.

What does it mean for your organisation?

Improving your energy efficiency will save you money and improve your organisation's reputation. The CRC further strengthens the business case for doing this.

Position your organisation for maximum savings

There is a clear financial incentive to perform well in the CRC. You will reduce the number of emissions allowances you need to buy if you cut emissions, putting you at a cost advantage to competitors that have not cut emissions.

Find out how our Business advice and Footprinting certification services can help your organisation perform well in the CRC and prepare for mandatory carbon reporting.

An opportunity to enhance your business reputation

As well as the financial benefits of achieving emissions reductions, you will also be better positioned to reap the reputational benefits associated with these reductions. The Carbon Trust can help you to do this, including through the  Carbon Trust Standard.

Further information

Visit DECC's CRC Energy Efficiency Scheme site or find out how our services can help your organisation.